Chasing electrification

One of the important changes that needs to take place in the global energy system as it heads towards much lower emissions is electrification. This is the increasing use of electricity as final energy (i.e. the energy we all use to deliver services) rather than fossil fuels, such as natural gas for cooking and gasoline for mobility. According to the IEA, electricity made up nearly 19% of final energy use in 2015, with the bulk of the 81% that isn’t electricity being oil products, natural gas, coal and biomass. The Shell scenario work on a net zero emissions world indicates that electricity should exceed 50% of final energy use.

Over the course of the last few decades, electrification of final energy has moved relatively slowly, at around 2 percentage points per decade (i.e. it was about 16.5% in 2005 and 14.4% in 1995). This rate of change is far below what is necessary to reach 50+% during the second half of the century – in fact, at the current rate it would take over one and half centuries to get above 50%. Therefore, the rate of electrification of the final energy system has to approximately triple over the coming few years for the Paris goals to be approached. At the same time, overall expansion of the energy system also has to be catered for, which might see a near doubling in final energy demand, even as electrification brings considerable efficiency gains.

Chasing Electrification

Today, global electricity production stands at some 25,000 TWh per annum, representing ~19% of final energy demand. The trends described above indicate electricity production rising to at least 100,000 TWh per annum during the second half of the century, or the addition of ~1,400 TWh of generation per annum from now on. The 3.3 GW Hinkley Point nuclear power station being constructed in the UK operating at full capacity for the entire year would add about 29 TWh. The likely progression probably won’t be linear, so good progress would still require some 800-1100 TWh added each year in the near term. That’s still at least 30 Hinckley Point projects brought on line each year.

This new electricity production shouldn’t contribute additional emissions to the atmosphere, so many will look for it to come from wind and solar. Total global generation from wind and solar was around 1,300 TWh in 2016, but the added generation from 2015 to 2016 was 208 TWh (Source: BP Statistical Review of World Energy) against total added electricity generation of 600 TWh. Total added generation in recent years has average around 500 TWh, well short of the 800-1100 TWh mentioned above.

Additional solar and wind are not yet close to meeting additional generation needs, although both are rising quickly with additional generation more than doubling over the last six years. That would point to somewhere around 2030 when all new generation needs are being met by additional solar and wind being added to the grid in sufficient quantity for both demand and increasing electrification needs. It also means that emissions from electricity generation globally will only fall in the medium term to the extent that natural gas and nuclear can displace coal. Although coal use is now falling in some economies, it is also increasing rapidly in others as new generation capacity is required for development. Vietnam is one such economy, with several new facilities close to approval.

Electrification of the energy system is a critical driver for change, yet progress today is more mixed than many recognize. Although renewable penetration has been significant in recent years, it must make even more rapid progress in the next decade to bring about material change in the time frames that are being contemplated for net-zero emissions (with some expecting such an outcome by 2050 ). The first electricity grid appeared in New York in September 1882, 135 years ago. Although the technology has spread globally and appears ubiquitous, it still requires significant development and expansion. That will certainly happen, but the time-frame in the context of the Paris Agreement appears uncertain.

Scenarios are part of and ongoing process used in Shell for more than 40 years to challenge executives’ perspectives on the future business environment. They are based on plausible assumptions and quantification and are designed to stretch management thinking and even to consider events that may only be remotely possible.